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Q Arwin Bpp(fmc june 2004)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Q Arwin Bpp(fmc june 2004)

  • This topic has 1 reply, 2 voices, and was last updated 11 years ago by John Moffat.
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  • November 15, 2013 at 2:55 pm #146165
    diannel2012
    Member
    • Topics: 18
    • Replies: 37
    • ☆☆

    part B ii Operational Gearing

    can i calculate it as operating gearing= total contribution / (total contribution – Fixed Cost )

    i did it like this : =
    contribution = 50 k – 25.5 k = 24.5 k
    fixed cost = 2500

    ___ operating gearing = 24.5 / (24.5 – 2.5 k) = 1.11

    is this wrong? cuz the book answer is 4.1

    November 16, 2013 at 11:08 am #146296
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54682
    • ☆☆☆☆☆

    There is no standard measure of operating gearing.

    Unless the question specifically tells you how it wants it to be measured, then you can do it any way you like.

    Expressing it as contribution/profit, as you have, is fine (provided of course you can comment on changes from year to year sensibly 🙂 )

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